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Dollar Hit by Confidence and News Home Sales

Last updated 12/23/2009 10:25 AM ET (GMT -5) 4 Comments

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Kathy Lien

Director of Currency Research, GFT

Another round of weak economic data has forced the U.S. dollar to give up its gains.  Although the lofty University of Michigan consumer confidence numbers were revised lower for December, it does not draw away from the fact that confidence improved dramatically this month. The big surprise was in new home sales which fell by a staggering 11.3 percent in November.  This is the sharpest decline that we have seen since January and the lowest number of units sold since April.  Not only does the large decline offset the strong demand for existing home sales but it provides a taste of what may be to come for the housing market when the tax break ends next year. With such weak demand for new home sales, we are surprised to see an increase in the median new home price last month.  Although prices fell 1.9 percent when compared to the year prior, they rose 3.8 percent between October and November.  Nonetheless the teflon dollar has finally buckled under the weight of disappointing economic data and we believe that the buck will remain weak for the rest of the trading day. 

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Comments (4)

Semaj

December 23, 2009 at 11:31 AM ET

Is the new home sale chart showing a shallow retracement or a double bottom, mmm? With some predicting another 20-40% drop in real estate values, jobs still a big ? in Q1, post holiday retail data TBD, is the the start of round 2 in the economy/markets?

K, if so, does the dollar resume its safe haven status in 2010 or does it trade sideways longterm til further notice?

klien

December 23, 2009 at 04:41 PM ET

I dont think that is the case but if we do have a double dip recession, that would initially hurt the dollar

fuji

December 23, 2009 at 01:48 PM ET

Hi, Kathy, Happy Holiday and a Healthy Prosperity New Year ! EUR/USD H4/H1 chart indicated the down trend has broken. is it telling us the EUR in a shortern relive rally or a reversal trend ? perhaps its only my misreading on the chart ?

klien

December 23, 2009 at 04:42 PM ET

The 1.42 level is support in the EUR/USD but despite the rally, the overall downtrend remains intact

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.